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Gold Jumps on Cyprus Worries and Pledges of Easy Monetary Policyby Peter A. Grant
Mar 21, AM 
Gold jumped to another new three-week high amid rumors of troika ultimatums on Cyprus and more easy monetary policy talk from the Fed's Bernanke and the BoJ's Kuroda. The yellow metal moved back withing striking distance of the late-February high at 1620.23.The troika has reportedly warned Cyprus that a bailout deal must be reached by Monday, or they risk losing ECB liquidity support. In the wake of Parliament's rejection of the savings confiscation, they are now apparently considering a raid on the pension system. Funds pilfered from the pension program would be replaced by government bonds, which are considered to be junk by all of the ratings agencies. The risks that Cyprus will exit the EMU have risen dramatically, which may have eurozone-wide implications. In rejecting a 7%-10% tax on their savings, the Cypriot people are risking far more than that should an exit occur. I suspect a return to the Cypriot pound would come with a devaluation of 40% or more. You can pay me now, or pay me later... Fed chairman Bernanke reiterated yesterday that the central bank would stay the course on zero interest rate policy and QE. Overnight, the BoJ's new governor lived up to expectations that he was going to be the doveyest of all dovey G7 central bank chiefs. "There is no doubt that we need to carry out bold monetary easing both in terms of quantity and quality," said Haruhiko Kuroda in his very first press conference as the head of the BoJ. He categorized QE as "indispensable" in pledging to meet his 2% inflation target within two-years. This increases the likelihood that open-ended asset purchases will begin before January 2014. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here. |
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